You probably couldn’t have scripted a better response by the market and leading stocks to last week’s wild action—the major indexes (a couple of which nosed below their 50-day lines last Friday) have moved straight up this week, with some approaching new-high ground, and many leaders have followed suit. Indeed, in our issue this week, we said the next few days should be key, and we think they have been.
This action means the odds favor last week being more of a shakeout than the start of something worse. And that’s doubly true for some key stocks—we saw more than a few early-stage shakeouts, where, after taking off in the second half of last year, many chopped around for a few weeks and then dipped below obvious support (50-day lines, prior lows, etc.), before soaring to the heavens this week. Such action usually portends bullish things.
Now, with that said, just as one bad week (last week) didn’t mean the world was ending, one great week (this week) doesn’t necessarily erase all of the abnormal action seen last week. One thing to watch is whether the rally thins out—as the Nasdaq has returned to virgin turf, far fewer stocks are doing the same now vs. a couple of weeks ago. Plus, after a good-sized run, violent straight-down, straight-back-up type of patterns can often lead to some tricky action—indeed, many stocks actually top out seeing upon this action.
Still, even before this week’s snapback, most of the evidence was still positive (intermediate-term trend was up for most indexes and leaders), and obviously the strength this week is a good thing. We still think picking your spots is paramount; some of this week’s winners could easily gyrate in the near-term, and there are tons of names reporting earnings in the next couple of weeks. But we are going to bump our Market Monitor back up to a level 7 to reflect the strong snapback.
SUGGESTED BUYS
Farfetch (FTCH) looks like one of those names that had an early-stage shakeout last week, dipping to seven-week lows before storming back and bursting to new highs on good volume this week. It’s going to be volatile, but we’re OK starting a position here or on any dips.
TG Therapeutics (TGTX) had a huge upmove in December and spent the next six weeks consolidating and (more recently) pulling into its 10-week line. And now it’s begun to bounce, popping back above the 50 level on good volume early this morning. We’re OK starting a position here with a stop under the recent low (near 46).
Both CrowdStrike (CRWD) and Zscaler (ZS) have bounced very well from their shakeout lows last week, and both had generally been in up-and-down consolidations for a few weeks before that. Another modest dip wouldn’t shock us, but both stocks appear to want to head higher—small positions in either with a relatively loose stop (12% to 15% from your purchase) is fine by us.
SUGGESTED SELLS
We have just two outright sells this week:
Qualcomm (QCOM) – tripped stop after earnings
Spotify (SPOT) – tripped stop after earnings
SUGGESTED STOPS
10x Genomics (TXG) near 163
Align Technology (ALGN) near 525
Applied Materials (AMAT) near 93
Canopy Growth (CGC) near 33
Cimarex Energy (XEC) near 41
Cloudflare (NET) near 72.5
Enterprise Product Partners (EPD) near 19.7
Floor & Décor (FND) near 90
General Motors (GM) near 47
GrowGeneration (GRWG) near 43.5
Guardant Health (GH) near 140
Inari Medical (NARI) near 92
Marvell Tech (MRVL) near 48
Michael’s Stores (MIK) near 13.9
MongoDB (MDB) near 345
Mosaic (MOS) near 25.5
Palo Alto Networks (PANW) near 341
PayPal (PYPL) near 234
Peloton (PTON) near 137
Pinduoduo (PDD) near 162
Redfin (RDFN) near 71
Snap (SNAP) near 50.5
Sonos (SONO) near 25
Tapestry (TPR) near 31.5
Vale (VALE) near 16
Wesco (WCC) near 78